Oil lower as U.S. inventories reach record high 533.1 million barrels

Sources within OPEC have indicated that its members increasingly favour extended production cuts but want the backing of non-OPEC memers, such as Russian Federation, which have yet to deliver fully on existing reductions. On one hand, the rise in USA refinery utilization rate indicates the annual maintenance season is now past and refiners will lap up more crude, said Societe Generale. USA oil drillers boosted the rig count to 631 last week, the most since September 2015, Baker Hughes data show.

However, London-based Barclays bank predicted that the weakness in the latest oil price will not continue as its analysts expect prices to climb in the range of $50 and $60 in the next quarter.

As a result, US oil output has risen to over 9.1 million bpd from below 8.5 million bpd in June previous year.

Opec will extend the deal if stockpiles are still above their five-year average, Saudi Arabia Energy Minister Khalid Al-Falih said in an interview with Bloomberg Television last week.

The group and some non-Opec producers agreed to curb production from January 1 by 1.8 million barrels per day (bpd) for six months to drain crude from record stockpiles.




U.S. oil stocks fell marginally last week after increasing for nine straight weeks but are still near a record high.

On Wednesday, data from the U.S. Energy Information Administration showed U.S. inventories jumped by a bigger-than-expected 5 million barrels last week to 533.1 million. Brent crude was trading around $51 a barrel at 10.26am in Dubai.

"Last week's increase in USA production and stocks will do little to assuage fears that the OPEC output cuts will not be enough to draw down stocks", Thomas Pugh, a commodities economist at London-based Capital Economics, said in a note.

FXTM research analyst Lukman Otunuga said oil benchmarks will remain vulnerable to downside shocks as growing concerns over the excessive oversupply in the global markets weighed heavily on sentiment. Crude oil inventories have risen by ~50 million barrels in the United States so far this year. NASDAQ reported that crude oil recovered to $48.69 on Friday. It said the expected drop could help draw down USA inventories that stood at a record 533 million barrels in the week to last week. Overall gasoline demand also fell 2.9% from year-ago levels. "Fracking has only just begun here in the USA and it will be transferred swiftly to other countries overseas, so the supply of crude oil is going to increase rather dramatically in the years to come", he told the Reuters Global Markets Forum on Friday.

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